Chairman's Message

Dear Shareholders,

For Sartorius Stedim Biotech, 2016 was yet again a year of healthy growth in revenue and profit, and it was actually the sixth year in a row that we grew in double digits. We are pleased that with sales expansion of 20.4% and a margin of 27.5%, we reached the upper end of our guidance.

This successful development was partly based on strong end-market demand. New medical drugs were approved in relatively high numbers over the past few years, and we saw indications expand for various biologics already available, as well as increased business from biosimilar entrants. This strong demand was met by our comprehensive, biotech-tailored product and service offering that we have been building over the past years. Consequently, we achieved strong growth across the entire portfolio, including the product lines of our recent acquisitions. In particular, we saw the trend towards single-use bioprocessing systems continuing unabated at our customers' drug manufacturing facilities, which resulted in high growth rates for our consumables business.

Moreover, we continued to gain market share, especially in North America, the largest biopharma market and a region in which we have been historically underrepresented. Over the reporting year, we grew by 21.0% in North America and meanwhile have been generating around 37% of our sales in this region.

A key feature of our consumables-driven business model is that top-line growth translates directly into the expansion of profitability. Driven by these economies of scale, underlying EBITDA was up by 24.8%, the respective margin increased to 27.5% and underlying earnings per share reached €1.92, a gain of 26.8%. Therefore, the Board of Directors will submit a proposal to the Annual General Shareholders' Meeting to raise dividends yet again, by 26.0% to €0.42 per share.

After the price of our shares had increased nearly fivefold over the past three years, development in 2016 was rather flat, with a gain of 2%. As announced, we executed on a stock split by six in May 2016 with the aim of increasing the tradability of our shares.

Fiscal 2016 was characterized not only by financial success, but also by further operational achievements.

We significantly progressed in our multi-year investment program and, to keep up with growth, even pulled forward and expanded some of our investments. These included additional membrane casting capacity at our Goettingen site in Germany, preparing for doubling the manufacturing capacity of single-use bags and filters in Puerto Rico and opening a new testing lab in Boston, Massachusetts, USA.

Further expansion of our portfolio has also continued to be a key item on our agenda. We are highly satisfied with how well our recently acquired businesses like Cellca, BioOutsource and TAP have been developing and performing under the Sartorius Stedim Biotech umbrella. Besides growing strongly on their own, all of these acquisitions generate promising synergies for our existing product portfolio.

In 2016, we were able to add the U.S. start-up kSep Systems, which has brought single-use centrifugation systems with great USPs to our offering, perfectly matching our existing upstream bioprocessing portfolio. Though market uptake of such new bioprocessing products is always slow due to the highly regulated nature of our end-market, we have already registered high interest among our customers and look forward to speeding up market penetration of this great new technology.

Moving forward, we expect continued profitable growth, and adhere to our mid-term plan of achieving sales revenue of around €1.5 to €1.6 billion at an underlying EBITDA margin of about 29% to 30% by 2020.

Specifically, for 2017, we are aiming to increase our sales revenue by about 8% to 12% and our operating profit margin by approximately 0.5 percentage points, with both figures stated in constant currencies. Given our strong growth, our investments in global infrastructure and manufacturing capacity will continue at above-average levels, and are projected at a capex ratio in the range of 10% to 13%.

Strategically, our primary focus will stay on the biopharma market with its various submarkets. We expect that biotech will continue to grow faster than the global pharma market, remaining the innovation engine of this industry. Providing our customers with cost-effective bioprocessing technologies will become even more essential as this market matures and biosimilars make further inroads, increasing the volumes of biopharmaceuticals being manufactured. In this context, we also anticipate that the adoption of single-use systems will continue, encompassing a growing number of steps of our customers’ value chain, and that these systems will progressively move from pre-commercial manufacture to commercial scale.

The biopharma market will also become increasingly differentiated, and suppliers are expected to play an important role in making further progress possible, maintaining R&D and production costs under control, and in ultimately keeping medications affordable. Sartorius Stedim Biotech as a prime vendor to this market will continue to challenge itself to come up with innovative products and services, constantly enriching its portfolio via acquisitions, alliances and own R&D. In addition, we will also make further strides with regard to our processes and systems to make doing business with us as convenient and easy as possible.

The success we achieved in 2016 shows the capabilities and the potential of our company and its employees. I would like to thank our worldwide teams for their dedication, passion and accomplishments. I also appreciate the continued trust of our customers, partners and shareholders, and cordially invite you to continue with us on the road to further success.



Joachim Kreuzburg
Chairman of the Board and CEO